Republic Act No. 8559

Republic of the Philippines
Congress of the Philippines
Metro Manila

Tenth Congress
Republic Act No. 8559 February 26, 1998

AN ACT REGULATING THE PRACTICE OF AGRICULTURAL ENGINEERING IN THE PHILIPPINES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled::

ARTICLE I
TITLE AND STATEMENT OF POLICY

Section 1. Title. – This Act shall be known as the “Philippine Agricultural Engineering Act of 1998.”

Section 2. Statement of policy. – It is hereby declared a policy of the State to promote and upgrade the practice of agricultural engineering profession in the Philippines by instituting measures that will result in relevant agricultural engineering education and better career prospects for professional agricultural engineers.

Likewise, the State hereby guarantees the delivery of basic and technical services to accelerate agricultural modernization through adequate and well trained professional agricultural engineers throughout the country.

ARTICLE II
DEFINITION OF TERMS

Sec. 3. Definition of terms. – As used in this Act, the following terms shall mean:

(a) Practice of agricultural engineering – shall refer to the profession requiring the application of the fundamental and known principles of engineering to the peculiar condition and requirements of agriculture as an industry and as a field of science, and shall include, but not limited to, the following:

(1) Consultation, valuation, investigation and management services on agricultural engineering;

(2) Management or supervision and the preparation of engineering designs, plans, specifications, project studies and estimates for agricultural, aquaculture and fishery, and forest product machinery, agricultural buildings and structures, farm electrification and energy systems, agricultural processing equipment, irrigation and soils conservation systems and facilities, agricultural waste utilization systems and facilities;

(3) Conducting research and development, training and extension work, and consultancy services on agricultural engineering facilities/services, system and technologies;

(4) Testing, evaluation and inspection of agricultural, fishery and forest product machinery and other related agricultural engineering facilities and equipment;

(5) Management, manufacturing and/or marketing of agricultural machinery and other related agricultural engineering facilities and equipment;

(6) Teaching, agricultural engineering subjects in institution of learning in the Philippines;

(7) Employment with the government provided such item or position requires the knowledge and expertise of an agricultural engineer.

(b) Agricultural engineer – An agricultural engineer is a natural person who has been issued a certificate of registration by the Board of Agricultural Engineering and has taken the oath of profession of agricultural engineers.

ARTICLE III
BOARD OF AGRICULTURAL ENGINEERING

Section 4. Creation and composition of the board. – There is hereby created a Board of Agricultural Engineering, hereinafter called the Board, to be composed of a chairman and two (2) members to be appointed by the President of the Philippines from a list of three (3) recommendees for each position, chosen and ranked in the order of preference and submitted by the duly accredited association of agricultural engineers in the Philippines.

The Board shall be organized not later than six (6) months from the effectivity of this Act.

Section 5. Qualifications of members of the board. – A member of the Board shall, at the time of their appointment, possess the following qualifications:

(a) Must be a natural-born citizen and resident of the Philippines;

(b) Must be at least thirty-five (35) years of age;

(c) Must be a holder of Bachelor’s Degree in Agricultural Engineering or its equivalent, conferred by a school, academy, college or university in the Philippines or abroad that is accredited by the Commission on Higher Education (CHED);

(d) A registered agricultural engineer with a valid professional license and an active practitioner for not less than ten (10) years prior to his appointment;

(e) Must not, for a period of three (3) consecutive years prior to the appointment, be a member of the faculty of, directly or indirectly, in any school, academy, institute, college or university where a regular course in agricultural engineering is being taught, nor have any pecuniary interest in or administrative supervision over any such institutions of learning;

(f) Must not, for a period of three (3) consecutive years prior to the appointment, be connected with a review center or any group or association where review classes or lectures in preparation for the licensure examination are offered or conducted at the time of appointment; and

(g) Has never been convicted of any offense involving moral turpitude.

Section 6. Term of office. – The members of the Board shall hold office for a term of three (3) years and until their successors shall have been appointed and qualified. Of the members first appointed under this Act, one (1) member shall be appointed and hold office for three (3) years; one (1) member for two (2) years; and one (1) member for one (1) year.

The chairman or a member of the Board may be reappointed for another term but in no case shall he shall serve continuously for more than six (6) years. Each member of the Board shall qualify by taking the proper oath of office prior to entering upon the performance of duty.

Section 7. Compensation and allowances of the board. – The chairman and members of the Board shall receive compensation and allowances comparable to the compensation and allowances being received by the chairmen and members of existing regulatory boards with the Professional Regulation Commission, hereinafter referred to as the Commission as provided for in the General Appropriations Act.

Section 8. Vacancy and removal of board members. – Any vacancy occurring in the Board within the term of a member shall be filled for the unexpired portion of the term only.

The President may remove any member of the Board on the following grounds:

(a) Neglect of duty;

(b) Violation or tolerance of the violation of this Act or the Code of Ethics for agricultural engineering;

(c) Final judgment of crimes involving moral turpitude.

The member concerned shall be given due notice and hearing where his right to be heard and to defend himself, assisted by counsel, shall be respected in the proper administrative investigation.

Section 9. Powers and duties of the Board. – The Board shall exercise the following specific powers, functions and duties:

(a) To promulgate and adopt the rules and regulations necessary for carrying out the provisions of this Act;

(b) To supervise the registration, licensure and practice of professional agricultural engineers in the Philippines;

(c) To administer oaths of successful examinees entering the practice of agricultural engineering;

(d) To issue the certificate of registration to successful examinees;

(e) To issue, suspend or revoke the license for the practice of agricultural engineering profession;

(f) To adopt an official seal of the Board;

(g) To look into the conditions affecting the practice of the agricultural engineering profession and whenever necessary, adopt such measures as may be deemed proper for the enhancement and maintenance of high professional and ethical standards of the profession;

(h) To prescribe and/or adopt a Code of Ethical and Professional Standards for the practice of agricultural engineering profession.

(i) To hear and try administrative cases involving violations of this Act, its implementing rules and regulations, the Code of Ethics for Professional Agricultural Engineers and for this purpose, to issue subpoena and subpoena duces tecum to secure the appearance of witnesses and the production of documents in connection therewith;

(j) Prescribe guidelines in the Continuing Professional Education (CPE) program in coordination with the accredited association for professional agricultural engineers;

(k) To insure, in coordination with the Commission on Higher Education (CHED), that all educational institutions offering agriculture engineering education comply with the policies, standards and requirements of the course prescribed by CHED in the areas of curriculum, faculty, library and facilities;

(l) To discharge such other duties and functions as may be deemed necessary for the enhancement of the agricultural engineering profession and the upgrading, development and growth of agricultural engineering education in the Philippines;

(m) To prepare, adopt, issue or amend the syllabi of the subjects for examinations;

(n) To approve, issue, limit or revoke temporary license to practice agricultural engineering.

All policies, resolutions, rules and regulations of the Board shall be subject to the review and approval of the Commission.

Section 10. Supervision of the Board; custodian of its records, secretariat and support services. – The Board shall be under the administrative supervision and of the Commission. All records of the Board, including applications for examination, examination papers and results, minutes of deliberation, administrative cases and other investigations involving agricultural engineers shall be kept by the Commission.

The Commission shall designate the Secretary of the Board and shall provide the secretariat and other support services to implement the provisions of this Act.

Section 11. Annual report. – The Board shall, at the close of each calendar year, submit an annual report to the President through the Professional Regulatory Commission giving a detailed account of its proceedings and accomplishments during the year and making recommendations for the adoption of measures that will upgrade and improve the conditions affecting the practice of agricultural engineering in the Philippines.

ARTICLE IV
EXAMINATION , REGISTRATION AND LICENSE

Sec. 12. Examination required. – All applicants for registration for the practice of agricultural engineering shall be required to undergo and pass a written technical examination as provided for in this Act.

Section 13. Qualification of an applicant for examinations. – Every applicant for the examination for agricultural engineers shall establish the following:

(a) Be a citizen of the Philippines;

(b) Be a graduate of Bachelor of Science in Agricultural Engineering or its equivalent in a school, academy, institute, college or university duly recognized by the CHED.

Section 14. Fraudulent application. – The Board may suspend or revoke any certificate of registration obtained through misrepresentation made in the application for examination.

Section 15. Scope of examination. – The examination for agricultural engineering shall basically cover the following subjects:

(1) Agricultural mechanization, power, machinery and equipment;

(2) Soil and water conservation, irrigation and drainage; and

(3) Rural electrification, agricultural processing and agricultural structures.

The said subjects and their syllabi may be amended by the Board so as to conform to technological changes brought about by continuing trends in the profession.

Section 16. Rating in the Board Examinations. – To be qualified as having passed the Board examination for agricultural engineers, a candidate must obtain a weighted general average of seventy percent (70%), with no grades lower than fifty-five percent (55%) in any given subject. However, an examinee who obtains a weighted general average rating of seventy percent (70%) or higher but obtains a rating below fifty-five percent (55%) in any given subject must take the examination in the subject or subjects where he obtained a grade below fifty-five percent (55%).

Section 17. Report of ratings. – The Board shall submit to the Commission the ratings obtained by each candidate within twenty (20) days after the examination, unless extended for just cause. Upon the release of the results of the examination, the Board shall send by mail the rating received by each examinee at his given address using the mailing envelope submitted during the examination.

Section 18. Re-examination. – An applicant who fails to pass the examination for the third time shall be allowed to take another examination only after the lapse of one (1) year.

Section 19. Oath. – All successful candidates in the examination shall be required to take their oath before the Board or any government official authorized to administer oaths, prior to entering upon the practice of the agricultural engineering profession.

Section 20. Certificate of registration and professional license. – A certificate of registration shall be issued to applicants who pass the examination for agricultural engineers subject to payment of registration fees.

The certificate of registration of a professional agricultural engineer shall bear the signatures of the chairman of the Board and of the chairman of the Professional Regulation Commission and stamped with the official seal of the Board indicating that the person named therein is a registered agricultural engineer.

A professional license bearing the registration number, date of issuance, expiry date, and duly signed by the chairman of the Board, shall likewise be issued to every registrant upon payment of the professional fee. No person shall practice agricultural engineering in this country unless such person has secured a license to practice agricultural engineering in the manner herein provided. A licensee is entitled to practice agricultural engineering in the manner herein provided. A licensee is entitled to practice the profession with all the privileges appurtenant thereto until the expiration of the validity of his license.

Section 21. Seal and use of seal. – (a) Each registrant shall upon registration, obtain the seal of such design as the Board of Agricultural Engineering may adopt. Plans and specifications prepared by, or under the direct supervision of a registered agricultural engineer, shall be stamped with said seal during the validity of the professional license. No person shall stamp or seal any document with the seal of a registrant after his professional license has expired or lost its validity unless he has been reinstated to the practice and/or unless his license has been renewed.

(b) No officer or employee of the government, chartered cities, provinces and municipalities now or hereafter charged with the enforcement of laws, ordinances or regulations relating to the construction or alteration of agricultural structures, machineries and equipment, processes and systems shall accept or endorse any plans or specifications which have not been prepared and submitted in full accord with the provisions of this Act, nor shall any payment be approved by any such officer for any work, the plans and specifications of which have not been so prepared, signed and sealed by a duly registered agricultural engineer.

(c) No agricultural engineer shall sign his name, affix his seal or use any other method of signature of plans, specifications or other documents made by or under another agricultural engineer’s supervision unless the same is made in such manner as to clearly indicate the part of such work actually performed by him, and no person, except the agricultural engineer in charge shall sign for any branch of the work or any function of agricultural engineering practice not actually performed by him. The agricultural engineer in charge shall be fully responsible for all plans, specifications and other documents issued under his seal or authorized signature.

The Board shall formulate, adopt and promulgate all necessary rules and regulations for the effective implementation of the provisions relating to the design of the seal, the signing and sealing of drawings, reports and other documents by agricultural engineers.

(d) Drawings and specifications duly signed, stamped or sealed as instruments of service are the property and documents of the agricultural engineer, whether the projects for which they were made is executed or not. No person, without the written consent of the agricultural engineer or author of said documents, shall duplicate or make copies of said documents for use in the repetition of and for other projects or buildings, whether executed partly or in whole.

(e) All drawings, specifications and other documents to be used for the design, construction, test and evaluation of agricultural structures, machineries, equipments, processes and systems shall be signed and sealed by a licensed agricultural engineer.

Violation of any of the foregoing shall be ground for administrative and/or criminal action.

Section 22. Indication of license and professional tax receipt. – The agricultural engineer shall be required to indicate his Professional License Number, the duration of validity, including the professional tax receipt number on the documents he signs, uses or issues in connection with the practice of his profession.

Section 23. Grounds for suspension and revocation of license, cancellation of temporary/special permit. – The Board shall have the power, upon due notice and hearing, to revoke or suspend the license of an agricultural engineer, or to cancel a temporary/ special permit for any cause specified in the preceding Sec.s, including, but not limited to, the use or perpetuation of any fraud or deceit in obtaining a certificate of registration, or for incompetence, negligence or for abetting the illegal practice of agricultural engineering; violation of the provisions of this Act, its implementing rules and regulations and/or violations of the policies of the Board including the Code of Ethics and Professional Standard for agricultural engineers: Provided, however, That such action of the Board shall be subject to appeal to the Commission within fifteen (15) days from written notice.

ARTICLE V
PRACTICE OF AGRICULTURAL ENGINEERING

Section 24. Vested rights: automatic registration of practicing agricultural engineers. – All practicing agricultural engineers who are registered at the time this Act takes effect, shall automatically be registered.

Section 25. Practice not allowed for firms and corporations. – The practice of agricultural engineering is a professional service, admission to which shall be determined upon the basis of an individual’s personal qualifications.

No firm, company, partnership, association or corporation may be registered or licensed as such for the practice of agricultural engineering: Provided, however, That persons properly registered and licensed as agricultural engineer may among themselves or with a person or persons properly registered and licensed as an agricultural engineer may form or obtain registration with the Securities and Exchange Commission (SEC) of a firm, partnership or association using the term “Agricultural Engineers,” but nobody shall be a member, partner or associate unless he is duly registered and licensed agricultural engineer.

Section 26. Integration of agricultural engineers. – The agricultural engineering profession shall be integrated into one (1) national organization which shall be recognized by the Board and by the Commission as the one and only integrated and accredited association of agricultural engineers. An agricultural engineer duly registered with the Board shall automatically become a member of the integrated and accredited association of agricultural engineers, and shall receive the benefits and privileges appurtenant thereto upon payment of the required fees and dues. Membership in the integrated and accredited association shall not be a bar to membership in other associations of agricultural engineers.

Section 27. Foreign reciprocity. – No foreign agricultural engineer shall be issued a temporary license to practice the agricultural engineering profession or consultancy thereof or be entitled to any of the rights and privileges under this Act unless the country of which he is a subject or citizen specifically permits Filipino agricultural engineers to practice within its territorial limits on the same basis as the subjects or citizens of such foreign state or country.

Section 28. Funding. – Such sums as may be necessary to carry out the provisions of this Act shall be included in the General Appropriations Act of the year following its enactment into law.

Section 29. Implementing rules and regulations. – Subject to the approval of the Commission, the Board shall adopt and promulgate such rules and regulations, including the Code of Ethics and Professional Standards for Agricultural Engineers, to carry out the provisions of this Act, which shall be effective after thirty (30) days following its publication in the Official Gazette or in a major daily newspaper of general circulation.

Section 30. Enforcement. – The Professional Regulation Commission shall be the enforcement agency of the Board. As such, the Commission shall implement the concerned provisions of this Act, enforce its implementing rules and regulations as adopted by the Board, conduct investigations on complaints including violations of the Code of Ethics and Professional Standards of the profession and persecute when so warranted.

Section 31. Transitory provision. – The existing Board of agricultural engineering shall continue to function in the interim until such time the new Board shall be constituted pursuant to this Act.

Section 32. Penalties. – In addition to the administrative sanctions imposed under this Act, any person who violates any of the provisions of this Act shall, upon conviction, be penalized by a fine not less than Fifty thousand pesos (P50,000.00) nor more than Two hundred thousand pesos (P200,000.00), or imprisonment of not less than six (6) months nor more than (3) years, or both fine and imprisonment at the discretion of the court.

Section 33. Separability clause. – If any clause, provision, paragraph or part hereof shall be declared unconstitutional or invalid, such judgment shall not affect, invalidate or impair any other part hereof, but such judgment shall be merely confined to the clause, provision, paragraph or part directly involved in the controversy in which such judgment has been rendered.

Section 34. Repealing clause. – All laws, decrees, executive orders and other administrative issuances and parts thereof which are inconsistent with the provisions of this Act are hereby modified or superseded. Republic Act No. 3927 is hereby repealed.

Section 35. Effectivity. – This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in a major daily newspaper of general circulation in the Philippines, whichever comes first.

Approved: February 26, 1998

 

Implementing Rules & Regulations of the Foreign Investments Act of 1991

[Republic Act No. 7042]

AN ACT TO PROMOTE FOREIGN INVESTMENTS, PRESCRIBE THE PROCEDURES FOR REGISTERING ENTERPRISES DOING BUSINESS IN THE PHILIPPINES AND FOR OTHER PURPOSES

RULE I
DEFINITIONS

SECTION 1. Definition of Terms. – For the purpose of these Rules and Regulations:

a.  “Act” shall refer to Republic Act 7042 entitled “An Act to Promote Foreign Investments, Prescribe the Procedures for Registering Enterprises Doing Business in the Philippines, and for Other Purposes”, also known as the Foreign Investments Act of 1991, as amended.

b.  “Philippine national” shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by the citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent [60%] of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent [60%] of the fund will accrue to the benefit of the Philippine nationals; Provided, that where a corporation its non-Filipino stockholders own stocks in a Securities and Exchange Commission [SEC] registered enterprise, at least sixty percent [60%] of the capital stock outstanding and entitled to vote of both corporations must be owned and held by citizens of the Philippines and at least sixty percent [60%] of the members of the Board of Directors of each of both corporation must be citizens of the Philippines, in order that the corporation shall be considered a Philippine national. The control test shall be applied for this purpose.

Compliance with the required Filipino ownership of a corporation shall be determined on the basis of outstanding capital stock whether fully paid or not, but only such stocks which are generally entitled to vote are considered.

For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights is essential. Thus, stocks, the voting rights of which have been assigned or transferred to aliens cannot be considered held by Philippine citizens or Philippine nationals.

Individuals or juridical entities not meeting the aforementioned qualifications are considered as non-Philippine nationals.

c.  “Foreign corporation” shall mean one which is formed, organized or existing under laws other than those of the Philippines.

Branch office of a foreign company carries out the business activities of the head office and derives income from the host country.

Representative or liaison office deals directly, with the clients of the parent company but does not derive income from the host country and is fully subsidized by its head office. It undertakes activities such as but not limited to information dissemination and promotion of the company’s products as well as quality control of products.

d.  Investment shall mean equity participation in any enterprise organized or existing under the laws of the Philippines. It includes both original and additional investments, whether made directly as in stock subscription, or indirectly through the transfer of equity from one investor to another as in stock purchase. Ownership of bonds [including income bonds], debentures, notes or other evidences of indebtedness does not qualify as investments.

The purchase of stock options or stock warrants is not an investment until the holder thereof exercises his option and actually acquires stock from the corporation.

e.  “Foreign investment” shall mean an equity investment made by a non-Philippine national; Provided, however, That for purposes of determining foreign ownership, peso investments made by non-Philippine nationals shall be considered; Provided, further, That only foreign investments in the form of foreign exchange and/or other assets actually transferred to the Philippines and duly registered with the Central Bank (CB) and profits derived therefrom can be repatriated; and Provided, finally, That, for purposes of Section 8 of the Act, and Rule VIII, Section 6 of these Rules and Regulations, “Existing Foreign Investments” shall mean an equity investment made by a non-Philippine national duly registered with the SEC or the Bureau of Trade Regulation and Consumer Protection (BTRCP) in the form of foreign exchange and/or other assets transferred to the Philippines.

f.  “Doing business” shall include soliciting orders, service contracts, opening offices, whether liaison offices or branches; appointing representatives or distributors, operating under full control of the foreign corporation, domiciled in the Philippines or who in any calendar year stay in the country for a period totaling one hundred eighty [180] days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to and in progressive prosecution of commercial gain or of the purpose and object of the business organization.

The following acts shall not be deemed “doing business” in the Philippines:

1.  Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor;

2.  Having a nominee director or officer to represent its interest in such corporation;

3.  Appointing a representative or distributor domiciled in the Philippines which transacts business in the representative’s or distributor’s own name and account;

4.  The publication of a general advertisement through any print or broadcast media;

5.  Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by another entity in the Philippines;

6.  Consignment by a foreign entity of equipment with a local company to be used in the processing of products for export;

7.  Collecting information in the Philippines; and

8.  Performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis, such as installing in the Philippines machinery it has manufactured or exported to the Philippines, servicing the same, training domestic workers to operate it, and similar incidental services.

g.  “Export enterprise” shall mean an enterprise wherein a manufacturer, processor or service [including tourism] enterprise exports sixty percent [60%] or more of its output, or wherein a trader purchases products domestically and exports sixty percent [60%] or more of such purchases.

h.  “Exports” shall mean the volume of the Philippine port F. O. B. peso value, determined from invoices, bills of lading, inward letters of credit, loading certificates, and other commercial documents, of products exported directly by an export enterprise or the value of services including tourism sold by service-oriented enterprises to non-resident foreigners or the net selling price of export products sold by an export enterprise to another export enterprise that subsequently exports the same; Provided, That sales of export products to another export enterprise shall only be deemed exports when actually exported by the latter, as evidenced by loading certificates or similar commercial documents; and Provided, finally, That without actual exportation, the following shall be considered constructively exported for purposes of the Act: [1] sales of products to bonded manufacturing warehouses of export enterprises; [2] sales of products to export processing zone enterprises; [3] sales of products to export enterprises operating bonded trading warehouses supplying raw materials used in the manufacture of export products; and [4] sales of products to foreign military bases, diplomatic missions and other agencies and/or instrumentalities granted tax immunities of locally manufactured, assembled or repacked products whether paid for in foreign currency or pesos funded from inwardly remitted foreign currency.

Sales of locally manufactured or assembled goods for household and personal use to Filipinos abroad and other non-residents of the Philippines as well as returning overseas Filipinos under the Internal Export Program of the Government and paid for in convertible foreign currency inwardly remitted through the Philippine banking system shall also be considered exports.

i.  “Output” shall refer to the export enterprise’s total sales in a taxable year. The term sales shall refer to the value in case of heterogeneous products and volume in case of homogeneous products.

Heterogeneous products shall refer to products of different kinds and characteristics as well as to those of the same kind but with various categories using different units of measurement.

Homogeneous products shall refer to products of the same kind or category using a common unit of measurement.

j.  “Export ratio” shall refer to:

1.  the percentage share of the volume or peso value of goods exported to the total volume or value of goods sold in any taxable year if the export enterprise is engaged in manufacturing or processing;

2.  the percentage share of the peso value of services sold to foreigners to total earnings or receipts from the sale of its services from all sources in any taxable year if the export enterprise is service-oriented; Value of services sold shall refer to the peso value of all services rendered by an export enterprise to foreigners that are paid for in foreign currency and/or pesos funded from inwardly remitted foreign currency as properly documented by the export enterprise; or

3.  the percentage share of the volume or peso value of goods exported to the total volume or value of goods purchased domestically in any taxable year if the export enterprise is engaged in merchandise trading.

k.  “Domestic market enterprise” shall mean an enterprise which produces goods for sale, or renders service or otherwise engages in any business in the Philippines.

l. “Joint venture” shall mean two or more entities, whether natural or juridical, one of which must be a Philippine national, combining their property, money, efforts, skills or knowledge to carry out a single business enterprise for profit, which is duly registered with the SEC as a corporation or partnership.

m.  “Substantial partner” shall mean an individual or a firm who owns enough shares to be entitled to at least one [1] seat on the Board of Directors of a corporation, or in the case of a partnership, any partner.

n.  “Dangerous drug” as defined under Republic Act 6425 or the Dangerous Drugs Act, as amended, refers to either:

1. “Prohibited drug” which includes opium and its active components and derivatives, such as heroin and morphine; coca leaf and its derivatives, principally cocaine; alpha and bet eucaine; hallucinogenic drugs, such as mescaline, lysergic and dicthlylamide [LSD] and other substances producing similar effects; Indian hemp and its derivatives; all preparations made from any of the foregoing; and other drugs and chemical preparations whether natural or synthetic, with the physiological effects of a narcotic or hallucinogenic drug; or

2.  “Regulated drug” which includes, unless authorized by the Department of Health [DOH] and in accordance with the Dangerous Drugs Board, self-inducing sedatives, such as secobarbital, phenobarbital, pentobarbital, barbital, amobarbital or any other drug which contains a salt or a derivative of salt of barbituric acid; any salt, isomer, or salt of an isomer, of amphetamine such as benzedrine or dexedrine, or any drug which produces a physiological action similar to amphetamine; and hypnotic drugs, such as methaqualone, nitrazepam or any other compound producing similar physiological effects.

o.  “Advanced technology” refers to a higher degree or form of technology than what is domestically available and needed for the development of certain industries as subject to guidelines of the Department of Science and Technology [DOST].  Its introduction into the country through foreign investments under the terms and conditions of the Act must be linked to its appropriateness and adaptability to local conditions with a view towards eventual transfer and applicability including the upgrading of the indigenous technology available.

p.  “Paid-in equity capital” shall mean the total investment in a business that has been paid-in in a corporation or partnership or invested in a single proprietorship, which may be in cash or in property. It shall also refer to inward remittance or assigned capital in the case of foreign corporations.

q. “Foreign Investment Negative List [FINL]” or “Negative List” shall mean a list of areas of economic activity whose foreign ownership is limited to a maximum of forty percent [40%] of the outstanding capital stock in the case of a corporation, or capital in the case of a partnership.

r.  “NEDA Board” shall refer to the body constituted as such under Executive Order No. 230 entitled “Reorganizing the National Economic and Development Authority” and in which reside the powers and functions of the Authority.

s.  “NEDA” shall refer to the NEDA Secretariat, which is the body constituted as such under Executive Order No. 230 and which serves as the research and technical support arm and the Secretariat of the NEDA Board.

t.  “SEC” shall refer to the Securities and Exchange Commission.

u.  “BTRCP” shall refer to the Bureau of Trade Regulation and Consumer Protection as represented by the provincial offices of the Department of Trade and Industry [DTI].

v.  “BOI” shall refer to the Board of Investments.

w.  “Technology Transfer Board” shall refer to the Bureau of Patents, Trademarks and Technology Transfer (BPTTT).

x.  “Former natural born Filipino” shall mean those who have lost Philippine citizenship but were previously citizens of the Philippines falling in either of the following categories: [a] from birth without having to perform any act to acquire or perfect their Philippine citizenship; or [b] by having elected Philippine citizenship upon reaching the age of majority, if born before January 17, 1973, of a Filipino mother.

y.  “Transferee of private land” shall mean a person to whom the ownership rights of private land is transferred through either voluntary or involuntary sale, devise or donation or involuntary executions of judgment.

z.  “Direct employees” shall mean Filipino personnel hired and engaged under the control and supervision of the applicant investor/employer in the production of goods or performance of services. Excluded from this definition are personnel hired as casual, seasonal, learner, apprentice or any employee of subcontractor or those under fixed term employment.

aa.  “Start of commercial operation” shall mean the date when a particular enterprise actually begins production of the product for commercial purposes or commercial harvest in the case of agricultural activities. In the case of export traders and service exporters, the date when the initial export shipment in commercial quantity has been made or initial performance of service as borne out by the appropriate supporting documents.

RULE II
SCOPE

SECTION 1. Coverage. – The Act covers all investment areas or areas of economic activity except banking and other financial institutions which are governed and regulated by the General Banking Act and other laws under the supervision of the CB.

RULE III
BASIC GUIDELINES

SECTION 1. The Act covers restrictions pertaining to foreign equity participation only. All other regulations governing foreign investments remain in force.

SECTION 2. Monitoring of compliance with equity participation requirements. – The SEC or BTRCP, as applicable, shall monitor the compliance with the equity requirements of the Act.

RULE IV
REGISTRATION OF INVESTMENTS OF NON-PHILIPPINE NATIONALS

SECTION 1. Qualifications. –

a.  Any non-Philippine national may do business or invest in a domestic enterprise up to one hundred percent [100%] of its capital provided:

1.  it is investing in a domestic market enterprise in areas outside the FINL; or
2.  it is investing in an export enterprise whose products and services do not fall within Lists A and B [except for defense-related activities, which may be approved pursuant to Section 8(b)(1) of the Act] of the FINL.

Provided,  further,  That, as required by existing laws, the country or state of the applicant must also allow Filipino citizens and corporations to do business therein.

b.  Non-Philippine nationals qualified to do business per paragraph [a] above, but who will engage in more than one investment area, one or more of which is in the FINL, may be registered under the Act. However, said non-Philippine national will not be allowed to engage in the investment areas which are in the FINL.

c.  Existing enterprises which are non-Philippine nationals at the time of effectivity of the Act and which intend to increase the percentage of foreign equity participation under the Act, beyond that previously authorized by SEC, shall be governed by the qualifications in item [a] above. Thus, existing enterprises shall be allowed to increase the percentage share of foreign equity participation beyond current equity holdings only if their existing investment area is not in the FINL. Similarly, existing enterprises engaged in more than one [1] investment area shall be allowed to increase percentage of foreign equity participation if none of the investment areas they are engaged in is in the FINL.

Existing foreign corporations shall be allowed to increase capital even if their existing investment area is in the FINL.

Transfer of ownership from one foreign company to another shall be allowed even if the enterprise is engaged in an area in the FINL as long as there is the percentage share of foreign equity.

SECTION 2. Application for registration. –

a.  Filing of Application. Applications for registration shall be filed with the SEC in the case of foreign corporations and domestic corporations or partnerships which are non-Philippine nationals. In the case of single proprietorships, applications for Metro Manila shall be filed with the BTRCP or the DTI-National Capital Region. In the provinces, applications may be filed with the extension offices of the SEC for corporations/partnerships and the provincial offices of the DTI for sole proprietorships.

b.  Pre-Processing of Documents. Pre-processing of documents shall be undertaken to assist the investor in determining the completeness of his documents. All applications are considered officially accepted only upon submission of complete documents to either the SEC or BTRCP. Applications for clearances from the Department of National Defense [DND] or Philippine National Police [PNP] for defense-related activities, or the DOST for investments involving advanced technology shall be decided upon by said agencies within fifteen [15] working days.

c.  Approval. Within fifteen [15] working days from official acceptance of an application, the SEC or BTRCP shall act on the same. Otherwise, the application shall be considered as automatically approved if it is not acted upon within said period for a cause not attributable to the applicant.

SECTION 3. Registration with the SEC. –

a.  Existing Requirements. As required by existing laws and regulations, an application form together with the following documents shall be submitted to the SEC:

1.  In the case of new domestic corporation or a partnership:

i.    Articles of Incorporation/Partnership

ii.   Name Verification Slip

iii.  Bank Certificate of Deposit

iv. ACR/ICR, SIRV [Special Investors Resident Visa], Visa No. 13 of the alien subscribers

v.  Proof of Inward Remittance [for non-resident aliens]

2.  In the case of a foreign corporation:

i.   Name verification slip

ii.  Certified Copy of the Board Resolution authorizing the establishment of an office in the Philippines; designating the resident agent to whom summons and other legal processes may be served in behalf of the foreign corporation; and stipulating that in the absence of such agent or upon cessation of its business in the Philippines, the SEC shall receive any summons or legal processes as if the same is made upon the corporation at its home office.

iii.  Financial statements for the immediately preceding year at the time of filing of the application, certified by an independent Certified Public Accountant of the home country.

iv.  Certified copies of the Articles of Incorporation/Partnership with an English translation thereof,  if in a foreign language.

v.  Proof of inward remittance such as bank certificate of inward remittance or credit advices.
For representative offices, the amount remitted initially should be at least US$30,000.

If the paid-in equity/capital is in kind, additional requirements shall be submitted to the SEC pursuant to its existing rules and regulations.

All documents executed abroad should be authenticated by the Philippine Embassy or Consular Office.

3.  In the case of an existing corporation intending to increase foreign equity participation, all documents required of the proposed transaction under applicable laws, rules and regulations shall be submitted.

b.  Additional Requirements. As required by the Act, the following shall be submitted to the SEC:

1.  For enterprises wishing to engage in defense-related activities, clearance from the Department of National Defense [DND] or Philippine National Police [PNP].

2.  For small and medium-sized domestic market enterprises with paid-in equity capital less than the equivalent of US$200,000 but not less than the equivalent of US$100,000, a certificate from the Department of Science and Technology [DOST] that the investment involves advance technology, or a certificate from the appropriate Department of Labor and Employment [DOLE] Regional Office that the enterprise has issued an undertaking to employ at least 50 direct employees shall be submitted.

The Dole through its Regional Offices, shall validate and monitor compliance by the investor to the undertaking that it will hire at least 50 direct employees within six [6] months from the start of commercial operations. Non-satisfaction of the undertaking shall be reported to the DOLE Regional Offices and to the SEC, which shall cause the investor to satisfy the appropriate higher investment requirement, with penalty for failure to satisfy the undertaking.

3.  For former natural-born Filipinos wishing to engage in investment areas allowed to them under this Act, the following documents are required:

I. Copy of birth certificate

a.  Certified by the local civil registrar or the National Statistics Office [NSO]; or

b.  For those born abroad, certificate of birth from the appropriate government agency of the country where the birth is recorded showing the father or mother to be a Filipino at the time of birth or if the citizenship of the parents is not indicated, additional proof that the parent is a Filipino at the time of the applicant investor’s birth.

II.  Those born before 17 January 1973 of Filipino mother must additionally submit all of the following: certified true copies of his/her sworn statement of election of Filipino citizenship, oath of allegiance from the civil registrar where the documents were filed and/or forwarded, and identification certificate issued by the Bureau of Immigration.

III.  In case of loss and/or destruction of the record of birth or non-registration of birth.

• Certificate of non-availability of birth certificate on account of loss and/or destruction of birth record from the local civil registrar and/or appropriate government agency if birth was registered abroad;
• Copy of birth certificate of mother or father certified by the local civil registrar or the NSO; and
• Affidavit of two [2] disinterested persons attesting to their personal knowledge that at the time of the applicant’s birth, the child was born of a Filipino mother or father.

Any document executed or issued abroad must be authenticated by the Philippine embassy or consulate having jurisdiction over the place of execution or issuance of the document.

c.  Application Fee. A reasonable application fee to be determined by the SEC shall be collected from each applicant.

d.  SEC Action. Upon fulfillment of all SEC requirements and favorable evaluation by the SEC, the Certificate of Registration under the Act for domestic corporations and partnerships, or license to do business in the case of a foreign corporation, shall be issued by the SEC. In case of disapproval, the SEC shall also inform the applicant in writing of the reasons for the disapproval of the registration.

SECTION 4. Registration with the BTRCP-Department of Trade and Industry. – .

a.  Existing Requirements. As required by existing laws and regulations, BTRCP Form No. 17 and accompanying documents shall be submitted to BTRCP.

All documents executed abroad should be authenticated by the Philippine Embassy or Consular Office.

b.  Additional Requirements. The additional requirements for corporations and partnerships provided under Sec. 3[b] hereof shall be complied with.

c.  Application Fee. A reasonable application fee to be determined by BTRCP shall be collected from each applicant.

d.  BTRCP-DTI Action. Upon fulfillment of all BTRCP-DTI requirements and favorable evaluation by DTI, the Certificate of Registration for Sole Proprietorship shall be issued by DTI. In case of disapproval, DTI shall also inform the applicant in writing of the reasons for the disapproval of the registration.

SECTION 5. Registration of non-Philippine nationals intending to engage in the same line of business as their existing joint venture. –

a.  During the transitory period, any applicant who has an investment in an existing joint venture, in which he or his majority shareholder in the existing joint venture is a substantial partner, shall be registered with the SEC or BTRCP in the same line of business if the Filipino partners representing the majority of the Filipino equity in the existing joint venture certify under oath that they are not capable and willing to make the investment needed for the domestic market activities, which is being proposed to be undertaken by the applicant.

b.  If the Filipino partners are willing and able to make the needed investment, the SEC shall not register the applicant, in which case, both joint venture partners may agree to undertake the expansion. Both partners are then required to place the balance of their agreed upon investment shares within six [6] months from the date of the agreement. The Filipino partner[s] shall not be compelled to make additional investment for the proposed expansion of domestic market activities, if such will result in a higher Filipino equity share. If the Filipino partner[s] fails to infuse said capital within said period, per the report of the non-Philippine national applicant to the SEC, the SEC or BTRCP shall then allow the registration of said non-Philippine national applicant as a separate enterprise under the Act.

RULE V
REGISTRATION WITH THE CENTRAL BANK

SECTION 1. CB Requirements. – Enterprises seeking to remit foreign exchange abroad for purposes of remittance of profits and dividends and capital repatriation in connection with the foreign investment made pursuant to the Act shall be deemed registered with the CB after SEC or BTRCP registration. For this purpose, CB rules and regulations covering procedures for registration of foreign investments shall be observed.

RULE VI
FOREIGN INVESTMENTS IN EXPORT ENTERPRISES

SECTION 1. Allowable foreign equity participation. – Foreign equity participation in export enterprises shall be allowed up to one hundred percent [100%] provided that the products and services of such enterprises do not fall within Lists A and B of the FINL.

SECTION 2. Registration of export enterprises. – Export enterprises shall be deemed registered with the BOI pursuant to Section 6 of the Act upon registration with the SEC or BTRCP.

Enterprises registered under the Act seeking to avail of incentives under E. O. 226 must apply for registration with the BOI.  Rules and regulations on E. O. 226 shall be observed for this purpose.

Within ten [10] working days from the issuance of the certificate of registration, the SEC or BTRCP shall transmit to BOI copies of the Certificate of Registration together with the application form duly accomplished by the export enterprises.

SECTION 3. Submission of reports.  – All duly-registered export enterprises under this Rule shall submit to the Board of Investment a duly accomplished form within six [6] months after the end of each taxable year.

Failure of export enterprises to submit the required reports within the prescribed period of time or the submission of fraudulent reports shall be a ground for the SEC or BTRCP to impose appropriate sanctions as provided for under Rule XVII, Section 1, of these Rules and Regulations.

SECTION 4. Monitoring of compliance with the export requirement. – Upon receipt of the report submitted by the export enterprise, the BOI shall determine compliance of the enterprise with the export requirement. If the enterprise fails to comply with the export requirement, the BOI shall advise the SEC or BTRCP of said failure. The SEC or BTRCP shall require the firm to immediately increase its export to at least sixty percent [60%] of total sales. If the firm fails to comply with the order of the SEC or BTRCP without any justifiable reason, it shall be penalized in accordance with the provisions of Rule XVIII, Section 1 of these Implementing Rules and Regulations. The BOI, in consultation with the SEC and BTRCP, shall issue guidelines for this purpose.

RULE VII
FOREIGN INVESTMENTS IN DOMESTIC MARKET ENTERPRISES

SECTION 1. Allowable foreign equity participation. – Foreign equity participation in domestic market enterprises shall be allowed up to one hundred percent [100%] unless such participation is prohibited or limited by existing laws or the FINL.

SECTION 2. Change of status from domestic market enterprise to export enterprise. – At its option, a domestic market enterprise may change its status to an export enterprise if, over the last three [3] years, it consistently exported in each year thereof sixty percent [60%] or more of its output.

Section 2 of Rule VI shall apply for any change of status from domestic to export enterprise. Such application shall be supported by the relevant reports cited in Rule VI, Section 3 hereof, as evidence that the applicant enterprise has consistently exported sixty percent [60%] or more of its output.

The new export enterprise shall be subject to the reportorial requirements and shall be monitored or its compliance with the export requirement under Sections 3 and 4, respectively, of Rule VI of these Rules and Regulations.

RULE VIII
THE REGULAR FOREIGN INVESTMENT NEGATIVE LIST

SECTION 1. Description. – The Regular FINL shall have three [3] component list: A, B, and C which shall contain areas of economic activities reserved to the Philippine nationals. The description and guidelines governing Lists A, B and C are provided for in Rules IX, X and XI hereof, respectively.

SECTION 2. Formulation. – The NEDA shall be responsible for the formulation of the Regular FINL, following the process and criteria provided in Section 8 of the Act and in Rules IX, X and XI hereof.

SECTION 3. Approval.  – The NEDA shall submit the proposed Regular FINLs to the President for approval and promulgation. The NEDA shall submit the first Regular FINL to the President at least forty five [45] days before the scheduled date of publication.

SECTION 4. Publication. – The NEDA shall publish the first Regular Negative List not later than sixty [60] days before the end of the transitory period.

SECTION 5. Effectivity. – The first Regular Negative List shall become immediately effective at the end of the transitory period. Subsequent Regular FINLs shall become effective fifteen [15] days after publication in two [2] newspapers of general circulation in the Philippines.  Except for List A, each Regular FINL shall remain in force for two [2] years from the date of its effectivity.

SECTION 6. Coverage of operation. – Each Regular FINL shall apply only to new foreign investments and shall not affect existing foreign investments at the time of its publication.

RULE IX
GUIDELINES FOR LIST A OF THE REGULAR FOREIGN INVESTMENT NEGATIVE LIST

SECTION 1. Coverage. – List A of the FINL shall consist of the areas of activities reserved to Philippine nationals where foreign equity participation in any domestic or export enterprise engaged in any activity listed therein shall be limited to a maximum of forty percent [40%] as prescribed by the Constitution and other specific laws.

The NEDA shall make an enumeration of said activities reserved to Philippine nationals by the Constitution and other specific laws.

SECTION 2. Amendments.  – Amendments to List A may be made by the NEDA anytime to reflect changes made by law regarding the extent of foreign equity participation in any specific area of economic activity.

RULE X
GUIDELINES FOR LIST B
OF THE REGULAR FOREIGN INVESTMENT NEGATIVE LIST

SECTION 1. Coverage. – List B shall consist of the following:

a.  Activities regulated pursuant to law which are defense or law enforcement-related, requiring prior clearance and authorization from the DND or PNP, to engage in such activity as the manufacture, repair, storage and/or distribution of firearms, ammunition, armored vests and other bullet proof attires, lethal weapons, military ordinance, explosives, pyrotechnics and similar materials.

However, the manufacture and repair of said items may be specifically authorized by the Secretary of National Defense or Chief of the PNP to non-Philippine nationals, provided a substantial percentage of output as determined by said agencies is exported.

Compliance with the export requirement shall be monitored by the DND or PNP, as the case may be.

b.  Activities which have negative implications on public health and morals, such as the manufacture and distribution of dangerous drugs; all forms of gambling; sauna and steam bathhouses and massage clinics.

c.  Small and medium-sized domestic market enterprises with paid-in capital of less than US$500,000 or its equivalent unless they involve advanced technology as determined by DOST.

d.  Export enterprises utilizing raw materials from depleting natural resources, with paid-in equity capital of less than US$500,000 or its equivalent.

SECTION 2. Process for determination of List B. –

a.  Activities [a] and [b] above shall be determined upon recommendation of the Secretary of National Defense, Chief of the PNP, Secretaries of Health or Education, Culture and Sports and endorsed by the NEDA or upon recommendation motu proprio of NEDA, approved and promulgated by the President. List B shall be submitted for Presidential action together with List A. The NEDA shall inform said agencies of the deadline for the submission of their recommendations.

b.  Enterprises which are covered by Section 1 [c] above are automatically reserved to Philippine nationals.

SECTION 3. Amendments.  – Amendments to List B shall be made only after two years, upon the recommendation of the Secretary of National Defense, Chief of the PNP, Secretaries of Health and Education, Culture and Sports, endorsed by the NEDA, or upon recommendation motu proprio of NEDA, approved and promulgated by the President. List B shall be submitted for Presidential action together with List A.

RULE XI
INVESTMENT RIGHTS OF FORMER NATURAL BORN FILIPINOS

SECTION 1. Former natural-born citizens of the Philippines shall have the same investment rights of a Philippine citizen in cooperatives under R. A. 6938, rural banks under R. A.  7353, thrift banks and private development banks under R. A. 7906, financing companies under R. A. 5980, and activities listed under List B including defense-related activities, if specifically authorized by the Secretary of National Defense

RULE XII
RIGHTS OF FORMER NATURAL-BORN FILIPINOS TO OWN PRIVATE LAND

SECTION 1. Any natural-born citizen who has lost his Philippine citizenship and who has the legal capacity to enter into a contract under Philippine laws may be a transferee of a private land up to a maximum area of 5,000 square meters in the case of urban or three [3] hectares in the case of rural land to be used by him for business or other purposes.

SECTION 2. In case where both spouses are qualified under the law, one of them may avail of the said privilege. However, if both shall avail of the privilege, the total area acquired shall not exceed the maximum allowed.

SECTION 3. In case the transferee already owns urban or rural land for business or other purposes, he shall still be entitled to be a transferee of additional urban or rural land for business or other purposes, which when added to those already owned by him shall not exceed the maximum areas allowed.

SECTION 4. A transferee may acquire not more than two [2] lots which should be situated in different municipalities or cities anywhere in the Philippines. The total land area acquired shall not exceed 5,000 square meters in the case of urban land or three [3] hectares in the case of rural land for use by him for business or other purposes. A transferee who has already acquired urban land shall be disqualified from acquiring rural land and vice versa. However, if the transferee has disposed of his urban land, he may still acquire rural land and vice versa, provided that the same shall be used for business or other purposes.

SECTION 5. Land acquired under this Act shall be primarily, directly and actually used by the transferee in the performance or conduct of his business or commercial activities in the broad areas of agriculture, industry, and services, including the lease of land, but excluding the buying and selling thereof.  A transferee shall use his land to engage in activities that are not included in the Negative List or in those areas wherein investment rights have been granted to him under this Act.

SECTION 6. Registration of land. – The Register of Deeds in the province or city where the land is located shall register the land in the name of the transferee that it will be used for any of the purposes mentioned in Section 5 above, i.e., certification of business registration issued by the BTRCP/Department of Trade and Industry and affidavit that the land shall be used for business purposes.

The provision of B. P. 185 [An Act to Implement Section 15 of Article XIV of the Constitution and for Other Purposes Pertaining to the Ownership of Private Lands for Residential Purposes by Former Natural Born Filipinos] and its implementing Rules and Regulations shall be adopted, where applicable, in the implementation of this Act through a Circular to be issued by the Land Registration Authority.

The Register of Deeds shall also ensure that the limits prescribed by law are observed.

RULE XIII
TRANSITORY PROVISIONS

SECTION 1. Prior to effectivity of these Implementing Rules and Regulations, the provisions of Book II of E. O. 226 and its implementing rules and regulations shall govern the registration of foreign investments without incentives.

SECTION 2. There shall be a transitory period of thirty-six [36] months after issuance of these Implementing Rules and Regulations to implement the Act.

SECTION 3. During the transitory period, the Transitory FINL described in Rule XIV, Section 1 hereof shall take effect.

RULE XIV
TRANSITORY FOREIGN INVESTMENT NEGATIVE LIST

SECTION 1. Description. – The Transitory FINL shall consist of the following:

a.  List A

All investment areas in which foreign ownership is limited by mandate of the Constitution and specific laws.

b.  List B

1.  Manufacture, repair, storage and/or distribution of firearms, ammunition, armored vests and other bullet proof attires, lethal weapons, military ordnance, explosives, pyrotechnics and similar materials required by law to be licensed by and under the continuing regulation of the DND or the PNP, as the case may be.

However, the manufacture or repair of these items may be specifically authorized by the Secretary of National Defense or the Chief of the PNP to non-Philippine nationals, provided a substantial percentage of output, as determined by the said agencies, is exported.

The extent of foreign equity ownership allowed shall be specified in the said authority/clearance.

Compliance with the export requirement shall be monitored by the DND or PNP, as the case may be.

2.  Manufacture and distribution of dangerous drugs; all forms of gambling, sauna and steam bath houses, massage clinics and other like activities regulated by law because of risks they may pose to public health and morals.

3.  Small and medium-sized domestic market enterprises with paid-in equity capital less than the equivalent of Two hundred thousand US dollars [US$200,000.00], are reserved to Philippine nationals: Provided, That if: [1] they involve advanced technology as determined by the Department of Science and Technology, or [2] they employ at least fifty [50] direct employees, then a minimum paid-in capital of One hundred thousand US dollars [US$100,000.00] shall be allowed to non-Philippine nationals.

SECTION 2. Formulation of the transitory foreign investment negative list. –

a.  NEDA, in consultation with relevant agencies, shall enumerate, as appropriate, the areas of investment covered in this Transitory FINL.

b.  The Transitory FINL shall be published in full at the same time as, or prior to, the publication of these Implementing Rules and Regulations to implement the Act.

RULE XV
OPTIONS FOR EXISTING BOI-REGISTERED ENTERPRISES

SECTION 1. Existing enterprises which have been issued Certificates of Authority to do Business or to Accept Permissible Investments under Book II of E. O. 226, Book II of PD 1789 and R. A. 5455, whose activities are included in the Transitory FINL or in subsequent Negative List, are allowed to continue to undertake the same activities which they have been authorized to do subject to the same terms and conditions stipulated in their certificates of registration.

Those whose activities have been previously authorized under Book II of E. O. 226, Book II of PD 1789 and R. A. 5455, and whose activities are not in the Transitory FINL or in subsequent Negative Lists may opt to be governed by the provisions of the Act.  Said enterprises shall be considered automatically registered with the SEC upon surrender of their certificates of authority to the BOI. The SEC shall issue a new certificate of authority upon advise of the BOI.

SECTION 2. Existing enterprises with more than forty percent [40%] foreign equity which have availed of incentives under any of the investment incentives laws implemented by the BOI may opt to be governed by the Act.  In such cases, said enterprises shall be required to surrender their certificates of registration, which shall be deemed as an express waiver of their privilege to apply for and avail of incentives under the incentives law under which they were previously registered. Subject to BOI rules and regulations, said enterprises may be required to refund all capital equipment incentives availed of.

RULE XVI
CONSISTENT GOVERNMENT ACTION

SECTION 1. No agency, instrumentality or political subdivision of the Government shall take any action in conflict with or which will nullify the provisions of the Act, or any certificate or authority granted hereunder.

RULE XVII
COMPLIANCE WITH ENVIRONMENTAL STANDARDS

SECTION 1. All industrial enterprises, regardless of nationality or ownership, shall comply with existing rules and regulations, and applicable environmental standards set by the Department of Environment and Natural Resources [DENR] to protect and conserve the environment.

The DENR shall provide the SEC with a list of environmentally critical activities/projects and areas. Necessary clearances may be secured after registration with the SEC.

RULE XVIII
ADMINISTRATIVE SANCTIONS

SECTION 1. Foreign investments in export enterprises.  – Non-compliance by any duly-registered export enterprise with Rule VI, Sections 3 and 4 above shall be subject to the following sanctions:

a.  For late submission of the required annual report –

1st violation – written warning
2nd violation – basic fine of P1,000.00 and a daily fine of P50.00
3rd violation – basic fine of P2,000.00 and a daily fine of P100.00
Subsequent violation – basic fine of P5,000.00

b.  For the submission of fraudulent reports –

FINEPARTNERSHIP/CORPORATIONSOLE PROPRIETORSHIP
1st violationP100,000.00P50,000.00
2nd violationP150,000.00P70,000.00
3rd violationFine in an amount not exceeding 1/2 of 1% of total paid-in capital but not more than Five Million PesosP100,000.00
Subsequent violationCancellation of registration granted under the Act

The President and/or official/personnel of the partnership/corporation responsible for the submission of fraudulent reports shall be subject to the following sanctions:

1st violation – a fine of P50,000.00
2nd violation – a fine of P100,000.00
3rd violation – a fine of P200,000.00

c.  For non-submission of the required reports within twelve [12] months after the taxable year, cancellation of the certificate of registration granted under the Act.

d.  For failure of any duly-registered export enterprise to comply, without justifiable reason, with the SEC or BTRCP order to increase its export to at least sixty percent [60%] of total sales:

FINEPARTNERSHIP/CORPORATIONSOLE PROPRIETORSHIP
1st violationP100,000.00P50,000.00
2nd violationP150,000.00P70,000.00
3rd violationFine in an amount not exceeding 1/2 of 1% of total paid-in capital but not more than Five Million PesosP100,000.00
Subsequent violationCancellation of registration granted under the Act

The President and/or official of the partnership/corporation responsible in the failure to comply with the said SEC or BTRCP order shall be subject to the following sanctions:

1st violation – a fine of P50,000.00
2nd violation – a fine of P100,000.00
3rd violation – a fine of P200,000.00

SECTION 2. Compliance with environmental standards. – Any industrial enterprise, regardless of nationality of ownership which fails to comply with existing rules and regulations to protect and conserve the environment and meet applicable environmental standards shall be subject to the sanctions as may be provided for in the rules and regulations of the DENR.

SECTION 3. Hearing of violations of the Act. – The SEC or BTRCP shall adopt their respective rules and regulations for the purpose of conducting hearings and investigations involving violations of the provisions of the Act and these Implementing Rules and Regulations.

SECTION 4. Other grounds for cancellation – The following are other grounds for the cancellation of the certificate of registration granted under the Act:

a.  Failure of non-Philippine national intending to engage in the same line of business as an existing joint venture, in which he or his majority shareholder is a substantial partner, to disclose such fact and the names and addresses of the partners in the existing joint venture in his application for registration with the SEC; or

b.  Commission of any other fraudulent act.

SECTION 5. Other violations. – Any other violations of the Act and these Implementing Rules and Regulations shall be penalized in accordance with Section 14 of the Act.

RULE XIX
EFFECTIVITY

SECTION 1. These Implementing Rules and Regulations shall take effect fifteen [15] days after publication in a newspaper of general circulation in the Philippines.

Approved by the NEDA Board:   9 July 1996.

Foreign Ownership of Land in the Philippines

Real Estate Ownership in the Philippines

In general Philippine real estate law prohibits the foreign ownership of land. This prohibition on foreigners owning land in the Philippines is found in the Philippines Constitution.

Former Filipinos and corporations of Philippine nationality may own land, buildings, condominiums and townhouses. A corporation is considered to be of Philippine nationality if at least 60% of the corporation is owned by Filipino citizens.

Foreign nationals may buy condominiums units in Philippine condos (shares in condominium corporations) as long as not more than 40% of the units in a project are acquired by foreigners (Republic Act No. 4726, otherwise known as the Condominium Act).

Exceptions to the 40% Foreign Ownership of Philippine Real Property

• Land Aquired before the 1935 constitution
• Acquisition through hereditary succession if the foreigner is a legal or natural heir
• Foreigners who acquired Philippine property when they used to be Filipino citizens, will maintain ownership of those properties even after their change of citizenship.
• Former natural-born Filipino citizen subject to the limitations prescribed by Law (Batas Pambansa 185 and R.A. 8179)
1 – For residential purpose – 1,000 square meters of urban land or one (1) hectare of rural land (BP 185)
2 – Cannot own both urban and rural land. Choose one type only.
3 – Previous ownership (when still a Filipino citizen) of residential urban or rural land will lower the 1,000 sq meter and 1 hectare limits above.
4 – Can own a maximum of two (2) lots only.
5 – Those lots must be in different cities or municipalities in the Philippines.
6 – A transferee of residential land acquired under Batas Pambansa Blg. 185 may still avail of the privileges granted under R.A. 7042 as amended by R.A. 8179.
For business or other commercial purpose – 5,000 square meters of urban land or three hectares of rural land. Section 5 of Rule XII states: “the land should be primarily, directly and actually used in the performance or conduct of the owner’s business or commercial activities in the broad areas of agriculture, industry and services including the lease of land but excluding the buying or selling thereof.”
– Ownership (when still a Filipino citizen) of urban or rural land used for business purposes will lower the 5,000 square meter and 3 hectare limits.
– Ownership of only one type of land is allowed either urban or rural not both.
– Ownership is restricted to 2 lots. Each lot must be in a different municipality.

Ownership Of Houses or Buildings by Foreigners in the Philippines

Foreigners my own buildings or houses in the Philippines legally; as long as they do not own the land on which it is built.

Foreign individuals, corporations or associations may lease land for a period of 25 years renewable for another 25 years. (P. D. No 471, Fixing a Maximum Period for the Duration of Leases or Private Lands to Aliens)

Companies or individuals investing in the Philippines may receive government permission to lease land for up to 50 years renewable for another 25 years. (Republic Act No. 7652, otherwise know as the Investors’ Lease Act)

Republic Act No. 8179

AN ACT TO FURTHER LIBERALIZE FOREIGN INVESTMENTS, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 7042, AND FOR OTHER PURPOSES

SECTION 1. Section 3, paragraph (a), of Republic Act No. 7042, otherwise known as the “Foreign Investments Act of 1991″, is hereby amended to read as follows:

“Section 3. Definitions. – As used in this Act:

[a] the term “Philippine national” shall mean a citizen of the Philippines, or a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent [60%] of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which one hundred percent [100%] of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent [60%] of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission [SEC] registered enterprise, at least sixty percent [60%] of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines, in order that the corporation shall be considered a Philippine national.”

SEC. 2. Sec. 7 of Republic Act No. 7042 is hereby amended to read as follows:

“Sec. 7. Foreign investments in domestic market enterprises. – Non-Philippine nationals may own up to one hundred percent [100%] of domestic market enterprises unless foreign ownership therein is prohibited or limited by the Constitution and existing laws or the Foreign Investment Negative List under Section 8 hereof.”

SEC. 3. Section 8 of the Foreign Investments Act of 1991 is hereby amended to read as follows:

“Sec. 8. List of investment areas reserved to Philippine nationals [Foreign Investment Negative List]. – The Foreign Investment Negative List shall have two [2] component lists: A and B:

[a] List A shall enumerate the areas of activities reserved to Philippine nationals by mandate of the Constitution and specific laws.

[b] List B shall contain the areas of activities and enterprises regulated pursuant to law:

1. which are defense-related activities, requiring prior clearance and authorization from the Department of National Defense [DND] to engage in such activity, such as the manufacture, repair, storage and/or distribution of firearms, ammunition, lethal weapons, military ordnance, explosives, pyrotechnics and similar materials; unless such manufacturing or repair activity is specifically authorized, with a substantial export component, to a non-Philippine national by the Secretary of National Defense; or

2. which have implications on public health and morals, such as the manufacture and distribution of dangerous drugs; all forms of gambling; nightclubs, bars, beer houses, dance halls, sauna and steam bathhouses and massage clinics.

“Small and medium-sized domestic market enterprises with paid-in equity capital less than the equivalent of Two hundred thousand US dollars [US$200,000.00], are reserved to Philippine nationals: Provided, That if [1] they involve advance technology as determined by the Department of Science and Technology, or [2] they employ at least fifty [50] direct employees, then a minimum paid-in capital of One hundred thousand US dollars (US$100,000.00) shall be allowed to non-Philippine nationals.

“Amendments to List B may be made upon recommendation of the Secretary of National Defense, or the Secretary of Health, or the Secretary of Education, Culture and Sports, endorsed by the NEDA, or upon recommendation motu proprio, of NEDA, approved by the President, and promulgated by a Presidential Proclamation.
“The transitory Foreign Investment Negative List established in Section 15 hereof shall be replaced at the end of the transitory period by the First Regular Negative Lists to be formulated and recommended by NEDA following the process and criteria provided in Sections 8 and 9 of this Act. The First Regular Negative List shall be published not later than sixty [60] days before the end of the transitory period. Subsequent Foreign Investment Negative List shall become effective fifteen [15] days after publication in a newspaper of general circulation in the Philippines: Provided, however, That each Foreign Investment Negative List shall be prospective in operation and shall in no way affect foreign investments existing on the date of its publication.

“Amendments to List B after promulgation and publication of the First Regular Foreign Investment Negative List at the end of the transitory period shall not be made more often than once very two [2] years.”

SEC. 4. Section 9 of the Foreign Investments Act of 1991 is hereby amended to read as follows:

“SEC. 9. Investment rights of former natural-born Filipinos. – For purposes of this Act, former natural-born citizens of the Philippines shall have the same investment rights of Philippine citizens in Cooperatives under Republic Act No. 6938, Rural Banks under Republic Act No. 7353, Thrift Banks and Private Development Banks under Republic Act No. 7906, and Financing Companies under Republic Act No. 5980. These rights shall not extend to activities reserved by the Constitution including [1] the exercise of profession; [2] in defense-related activities under Section 8 (b) hereof, unless specifically authorized by the Secretary of National Defense; and [3] activities covered by Republic Act No. 1180 [Retail Trade Act], Republic Act No. 5487 [Security Agency Act], Republic Act No. 7076 [Small Scale Mining Act], Republic Act No. 3018, as amended [Rice and Corn Industry Act], and P.D. 449 [Cockpits Operation and Management]“.

SEC. 5. The Foreign Investments Act is further amended by inserting a new section designated as Section 10 to read as follows:

“SEC. 10. Other rights of natural-born citizen pursuant to the provisions of Article XII, Section 8 of the Constitution. – Any natural-born citizen who has lost his Philippine citizenship and who has the legal capacity to enter into a contract under Philippine Laws may be a transferee of a private land up to a maximum area of five thousand [5,000] square meters in the case of urban land or three [3] hectares in the case of rural land to be used by him for business or other purposes. In the case of married couples, one of them may avail of the privilege herein granted: Provided, That If both shall avail of the same, the total area acquired shall not exceed the maximum herein fixed.

“In case the transferee already owns urban or rural land for business or other purposes, he shall be entitled to be a transferee of additional urban or rural land for business or other purposes which when added to those already owned by him shall not exceed the maximum areas herein authorized.

“A transferee under this Act may acquire not more than two [2] lots which should be situated in different municipalities or cities anywhere in the Philippines: Provided, That the total land area thereof shall not exceed five thousand [5,000] square meters in the case of urban land or three [3] hectares in the case of rural land for use by him for business or other purposes. A transferee who has already acquired urban land shall be disqualified form acquiring rural land and vice versa.”

SEC. 6. The National Economic and Development Authority, in consultation with the Board of Investments, the Department of Trade and Industry and Securities and Exchange Commission, shall prepare and issue the necessary primer and other information campaign materials regarding the Foreign Investments Act and the amendments introduced thereto, with copies of said materials furnished all the Philippine embassies, consulates and other diplomatic offices abroad and disseminated to Filipino nationals, former natural-born Filipino citizens, and foreign investors, within sixty [60] days after the effectivity hereof.

SEC. 7. The NEDA is hereby directed to make the necessary amendments to the implementing rules and regulations of Republic Act No. 7042 in order to reflect the changes embodied in the Act.

SEC. 8. Sections 9 and 10 of Republic Act No. 7042 and all references thereto in said law are hereby repealed or modified accordingly. All other laws, rules and regulation and/or parts thereof inconsistent with the provisions of this Act are hereby repealed or modified accordingly.

SEC. 9. If any part or section of this Act is declared unconstitutional for any reason whatsoever, such declaration shall not in any way affect the other parts or sections of this Act.

SEC. 10. This Act shall take effect fifteen [15] days after publication in two [2] newspapers of general circulation in the Philippines.
Approved: March 28, 1996
_____________
Republic Act No. 7042 was amended by Republic Act No. 8179 which was approved on March 28, 1996. The date of effectivity thereof was on April 15, 1996.

SECTION 1. Section 3, paragraph (a), of Republic Act No. 7042, otherwise known as the “Foreign Investments Act of 1991″, is hereby amended to read as follows:

Implementing Rules and Regulations of Republic Act No. 8762

RULES AND REGULATIONS IMPLEMENTING
REPUBLIC ACT NO. 8762,
AN ACT LIBERALIZING THE RETAIL TRADE BUSINESS,
REPEALING REPUBLIC ACT NO. 1180, AS AMENDED

Pursuant to the provisions of Section 11 of Republic Act No. 8762, the following rules and regulations are hereby promulgated.

RULE I
DEFINITION OF TERMS

Section 1. For purposes of this Rules and Regulations:

(a) “Retail Trade” shall mean any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for consumption.

(b) “High-end or Luxury Goods” shall refer to goods which are not necessary for life maintenance and whose demand is generated in large part by the higher income groups. Luxury goods shall include, but are not limited to, products such as: jewelry, branded or designer clothing and footwear, wearing apparel, leisure and sporting goods, electronics and other personal effects.

(c) “Investment” shall mean assets, tangible or intangible including but not limited to buildings, leasehold rights, furniture, equipment and inventory.

(d)  “Foreign Retailer” shall mean a non-Filipino citizen, if a natural person, or if a juridical person, a duly formed and organized corporation, partnership, association or entity that is not wholly-owned by Filipinos, engaged in retail trade.

(e) “Foreign Investor” shall mean a non-Filipino citizen, if a natural person, or if a juridical person, a duly formed and organized corporation, partnership, association or entity that is not wholly-owned by Filipinos, whether or not engaged in retail trade.

(f) “Natural-born Filipino Citizen” are those who are citizens of the Philippines from birth without having to perform any act to acquire or perfect their citizenship. Those who elect Philippine citizenship in accordance with Article IV, paragraph 3 of the 1987 Constitution shall be deemed natural-born citizens.

(g) “Consumption” shall mean the utilization of economic goods in the satisfaction of want resulting in immediate destruction, gradual decay or deterioration or transformation into other goods.

(h) “Manufacturer” refers to a person who alters raw material or manufactured or partially manufactured products, or combines the same in order to produce finished products for the purpose of being sold or distributed to others.

(m) “Processor” refers to a person who converts raw materials into marketable form by special treatment or a series of action that changes the nature or state of the product, like slaughtering, milling, pasteurization, drying, or dessicating, quick freezing and the like. Mere packing, packaging, sorting or classifying does not make a person a processor.

(n) “Farmer or Agriculturist” refers to an individual personally engaged in dairy farming, fish farming, aquaculture, poultry or livestock raising, and his principal income is derived from any one or more of the foregoing operations.

(o) “Capital” shall mean the working capital for sole proprietorships and partnerships, while for corporations, it shall be the paid-up capital.

(l) “Paid-Up Capital” shall mean the total investment in a business that has been paid-in in a corporation or partnership or invested in a single proprietorship, which may be in cash or in property. It shall also refer to inward remittance or assigned capital in the case of foreign corporations.

(m) “Retail Store” shall mean the company that owns the retail store  and/or the physical location, such as a shop, where goods are sold on a retail basis. It includes the administrative offices, warehouse, preparation facility or storage facility of such goods, regardless of whether or not it is adjacent to such outlet.

In cases where the administrative office, warehouse, preparation facility or storage facility services several stores, the capital for such administrative office, warehouse preparation or storage facility to be included in the investment requirement for one store shall be pro-rated to the number of stores being serviced.

(n) “Locally Manufactured Goods” shall mean goods produced in the Philippines.

(o) “Branch Office” shall mean an office of a foreign company that carries out the business activities of such head office and derives income from the host country.

(p) “Franchise” shall mean a business relationship wherein, for a consideration, the franchisor grants to the franchisee a licensed right, subject to agreed-upon requirements and restrictions, to conduct business utilizing the trade and/or service marks of the franchisor, and also provides to the franchisee, advice and assistance in organizing, merchandising, and managing the business conducted pursuant to the license. This type of agreement may include a licensing agreement or any similar arrangement.

(q) “Net Worth” shall mean total equity of a business; total assets less total liabilities.

(r) “Track record”  shall include the track record of the applicant-foreign retailer, its predecessors, or its principal stockholders, affiliates and subsidiaries.

(s) “Reciprocity Rights” shall denote the relation between two states when each of them, by their respective laws or by treaty, gives the citizens or nationals of the other certain privileges, as in the undertaking of retail trade activities, on condition that its own citizens or nationals shall enjoy similar privileges in the latter state.

Notwithstanding the law allowing one hundred percent foreign ownership of retail activities subject to the capitalization requirements, a foreign retailer shall only be allowed to own up to the extent of the foreign ownership allowed for retailing in its home country.

(t) A former natural born Filipino citizen is deemed “residing in the Philippines” if he physically stays in the country for at least one hundred eighty (180) days within a given year.

Sec. 2. Sales Not Considered As Retail. – The following sales are not considered as retail:

(a) Sales of a manufacturer, processor, laborer, or worker of products manufactured, processed or produced by him to the general public whose capital does not exceed One hundred thousand pesos (100,000.00);

(b) Sales by a farmer or agriculturist selling the products of his farm, regardless of capital;

(c) Sales arising from restaurant operations by a hotel owner or inn-keeper irrespective of the amount of capital, provided, that the restaurant is incidental to the hotel business

(d) Sales through a single outlet owned by a manufacturer of products manufactured, processed or assembled in the Philippines, irrespective of capitalization;

(e) Sales to industrial and commercial users or consumers who use the products bought by them to render service to the general public and/or produce or manufacture of goods which are in turn sold by them; or

(f) Sales to the government and/or its agencies and government-owned and controlled corporations.

RULE II
RIGHTS OF FORMER NATURAL BORN FILIPINOS
TO ENGAGE IN RETAIL TRADE

Section 1. Rights of Former Natural born Filipinos. – Any natural born Filipino citizen who has lost his Philippine citizenship and who has legal capacity to enter into a contract under Philippine laws may be allowed to engage in retail trade, provided that he resides in the Philippines.

Sec. 2. Documentary Evidences. – Any person who meets the requirements provided for under the preceding paragraph shall be considered as a Filipino citizen for purposes of this Act, upon showing any of the following documents:

1. Copy of birth certificate (i) certified by the local civil registrar or the National Statistics Office; or (ii) for those born abroad, certificate of birth from the appropriate government agency of the country where the birth is recorded showing the father or mother to be a Filipino at the time of birth or if the citizenship of the parents is not indicated, additional proof that the parent/s is a Filipino citizen or has not lost his/her Filipino citizenship at the time of the applicant’s birth; or (iii) those born before 17 January 1973 of Filipino mothers must additionally submit all of the following: certified true copies of his/her sworn statement of election of Filipino citizenship, oath of allegiance from the civil registrar where the documents were filed and/or forwarded, and identification certificate issued by the Bureau of Immigration;

2. In case of loss and/or destruction of the record of birth or non-registration of birth, a (i) Certificate of non-availability of birth certificate on account of loss and/or destruction of birth record from the local civil registrar and/or appropriate government agency if birth was registered abroad; or (ii) copy of birth certificate of mother or father certified by the local civil registrar or the NSO; and (iii) affidavit of two (2) disinterested persons attesting to their personal knowledge that at the time of the applicant’s birth, the child was born of a Filipino mother or father.

Any document executed or issued abroad must be authenticated by the Philippine Embassy/Consulate having jurisdiction over the place of execution or issuance of the document.

RULE III
CAPITALIZATION AND EQUITY REQUIREMENTS

Section 1. Foreign Equity Participation. – Foreign-owned partnerships, associations and corporations formed and organized under the laws of the Philippines may, upon registration with the Securities and Exchange Commission (SEC), or in case of foreign-owned single proprietorships, with the Department of Trade and Industry (DTI), engage or invest in the retail trade business, subject to the following categories:

Category A – Enterprises with paid-up capital of the equivalent in Philippine Pesos of less than Two million five hundred thousand US dollars (US$2,500,000.00) shall be reserved exclusively for Filipino citizens and corporations wholly owned by Filipino citizens.

Category B – Enterprises with a minimum paid-up capital of the equivalent in Philippines Pesos of Two million five hundred thousand US dollars (US$2,500,000.00) but less than Seven million five hundred thousand US dollars (US$7,500,000.00) may be wholly owned by foreigners except for the first two (2) years after the effectivity of this Act wherein foreign participation shall be limited to not more than sixty percent (60%) of total equity.

Category C – Enterprises with a paid-up capital of the equivalent in Philippine Pesos of Seven million five hundred thousand US dollars (US$7,500,000.00) or more may be wholly owned by foreigners.

Category D – Enterprises specializing in high-end or luxury products with a paid-up capital of the equivalent I Philippine Pesos of Two hundred fifty thousand US dollars (US$250,000.00) per store may be wholly owned by foreigners.

Sec.  2. Branches/Stores. – Opening of branches/stores by the registered foreign retailer shall be allowed, provided that the investments for each branch/store established by registered foreign retailers falling under Categories B and C must be no less than the equivalent in Philippine Pesos of Eight hundred thirty thousand US dollars (US$830,000.00).

RULE IV
PREQUALIFICATION OF FOREIGN RETAILERS

Section 1.  Prequalification Requirements. – Before a foreign retailer is allowed to engage in the retail trade business or invest in an existing retail store in the Philippines, it must possess all of the following qualifications:

(a) A minimum of Two hundred million US dollars (US$200,000,000.00) net worth in its parent corporation for Categories B and C, and Fifty million US dollars (US$50,000,000.00) net worth in its parent corporation for Category D;

(b) Five (5) retailing branches or franchises in operation anywhere around the world unless such retailer has at least one (1) store capitalized at a minimum of Twenty-five million US dollars (US$25,000,000.00):

(c) Five (5)-year track record in retailing;  and

For purposes of determining compliance with the above requirements, the net worth, track record and existence of branches and franchises of the parent company, its branches and subsidiaries and of its affiliate companies, as well as their predecessors, which substantially owns, controls or administers the operations of the applicant shall be considered.

(d) Only nationals from, or juridical entities formed or incorporated in countries which allow the entry of Filipino retailers shall be allowed to engage in retail trade in the Philippines.

Sec. 2. Application for Pre-Qualification. – A request for pre-qualification by the aforementioned foreign retailer must be submitted to the Board of Investments before filing a formal application to engage in the retail  business or invest in an existing retail store. Said request for pre-qualification must be accompanied by the following documents:

(a) Latest Annual Financial Statement showing the net worth of the applicant;

(b) Certification by a responsible officer of the applicant-foreign retailer duly authenticated by the Philippine Embassy/Consulate stating that:

i. it has been engaged in retailing for the past five years; and

ii. has at least five (5) retailing branches anywhere in the world, or at least one branch is capitalized at a minimum of Twenty-five million US dollars (US$25,000,000.00);

(c) Copies of franchise or licensing agreements between the applicant and its franchisee/licensee if the applicant fails to meet the preceding requirement of at least five (5) retailing branches; and

(d) Certification by the proper official of the home state of the applicant-foreign retailer to the effect that the laws of such state allows or permits reciprocal rights to Philippine citizens and enterprises together with the extent of participation allowed.

Sec. 3. Enterprises composed of Two (2)  or More Stockholders/Partners. –  If a single retailing corporation/partnership to be formed and organized under Philippine laws will be owned by several foreign retailers and foreign investors, an application for all of the stockholders/partners for pre-qualification must be filed with the BOI. The foreign retailer-stockholder/partner with the highest equity in said company should satisfy the conditions mentioned under Rule IV, Sections 1 and 2.

However, In cases where all or two or more of the foreign stockholders/partners have equal shares, the prequalification condition shall be deemed complied with if the stockholders/partners owning or controlling at least majority of the stocks or interests meet the aforementioned conditions.

Sec. 4. Issuance of Certificate of Compliance with Prequalification. – The Board of Investments (BOI), shall issue, within twenty (20) working days from submission of all necessary documents, after evaluation and verification, a Certification that the foreign retailer meets the qualifications prescribed by the law.

Sec. 5. List of Qualified Foreign Retailers. – The DTI through the Board of Investments (BOI) shall keep a record of foreign retailers who have been pre-qualified to establish retail stores in the Philippines. It shall ensure that the parent retail trading company of the foreign investor complies with the qualifications on capitalization and track record.

RULE V
INVESTMENTS IN EXISTING RETAIL STORES

Section 1. Foreign Investments in Existing Stores. – Any foreign investor, whether or not it is presently engaged in retail trade, may be allowed to invest in existing retail stores, publicly listed or not, subject to the paid up capitalization  amounts expressed in net worth, investment per store and equity requirements under Rule III hereof.

Sec. 2. Pre-qualification Requirements. – In addition to the foregoing, foreign investors which are also retailers that will invest in existing retail stores are required to be pre-qualified before they may actually buy shares thereto.

RULE VI
HIGH-END OR LUXURY GOODS

Section 1. List of Retailers selling High-End or Luxury Goods. – An annual list of foreign retailers selling high-end or luxury goods shall be formulated and regularly updated by the Inter-Agency Committee on Tariff and Related Matters of the National Economic Development Authority (NEDA) Board, in coordination with the relevant organizations and the private sector concerned. (Section 8, second to the last paragraph)

Sec. 2. Annual Report to Congress. – The Inter-Agency Committee on Tariff and Related Matters of the National Economic Development Authority (NEDA) Board shall annually report to Congress the list of foreign retailers selling high-end or luxury goods. (Section 8, last paragraph)

RULE VII
APPLICATION FOR REGISTRATION

Section 1. Filing of Application. – Applications for registration together with supporting documents, shall be filed with the Securities and Exchange Commission (SEC) in the case of domestic corporations or partnerships that are owned wholly or partially by foreign retailers, or the DTI through its Regional and Provincial Offices, in the case of single proprietorships.

All applications shall be subject to the payment of the prescribed filing fees.

Sec. 2. Certificate of Compliance with Pre-qualification Requirements. – No corporation/partnership/association or sole proprietorship owned wholly or partially by foreign retailers may be allowed to register without securing the necessary certificate of compliance with the prequalification conditions from the Board of Investments.

Sec. 3. Issuance of Certificate of Incorporation/Business Name. –  Upon submission of all the required documents, the Securities and Exchange Commission (SEC), in cases of corporations/partnerships/association and the Department of Trade & Industry, through its Regional or Provincial Offices in cases of sole proprietorships, shall issue the Certificate of Incorporation and the Business Name, respectively, granting legal personality to the applicant-retailer.

In addition, the foreign retailers shall secure all necessary permits and licenses from the concerned government agencies.

Sec. 4. BSP Registration of Inward Remittance. – Prior to operations, foreign retail stores and foreign investors shall register their investments with the Bangko Sentral ng Pilipinas (BSP) to ensure that the inward remittance of the required capital investment is fully documented.

The BSP shall issue the Bangko Sentral Registration Certificate (BSRC) upon submission of a bank certification of remittance of foreign exchange converted and sold to pesos through the authorized agent bank and compliance with such other BSP rules for such registration.

Sec. 5. Establishment of Branches. – All registered foreign retailers that will establish additional branches shall be required to file an application with the DTI, supported by documents showing proof of compliance with the US$830,000 investment requirement per branch, and the Certificate of Incorporation/DTI Certificate issued to the retailer.

Sec. 6. Reporting Requirements. – Every registered foreign retail enterprise shall submit annually to the Department of Trade and Industry (DTI) the following reports:

(a) A general information sheet in the prescribed form showing, among others, the accredited stores of the enterprise and the status of operations of the entity;

(b) An audited financial statement and income tax return;

(c) Certification by a responsible officer of the company showing the maintenance of the required minimum capital unless the foreign investor has notified the SEC and the DTI of its intention to repatriate its capital and cease operations in the Philippines;

RULE VIII
PROHIBITED ACTIVITIES OF QUALIFIED FOREIGN RETAILERS

Section 1. Accredited Stores. – Qualified foreign retailers shall not be allowed to engage in certain retailing activities outside their accredited stores through the use of mobile or rolling stores or carts, the use of sales representatives, door-to-door selling, restaurants and sari-sari stores and such other similar retailing activities.

Sec. 2. List of Prohibited Activities. – A detailed list of these prohibited activities shall be formulated by the DTI.

RULE IX
COMPLIANCE REQUIREMENTS

Section 1. Maintenance of Prescribed Minimum Capital. – The foreign investor shall be required to maintain in the Philippines the full amount of the prescribed minimum capital, unless the foreign investor has notified the SEC and the DTI of its intention to repatriate its capital and cease operations in the Philippines.

The SEC shall establish mechanisms to monitor the actual use in Philippine operation of the inwardly remitted minimum capital requirement.

Failure to maintain the full amount of the prescribed minimum capital prior to notification of the SEC and the DTI, shall subject the foreign investor to penalties or restrictions on any future trading activities/business in the Philippines.

Sec. 2. Public Offering of Shares of Stock. – All registered retail enterprises under Categories B and C in which foreign ownership exceeds eighty percent (80%) of equity shall offer a minimum of thirty percent (30%) of their equity to the public through any stock exchange in the Philippines within eight (8) years from their start of operations. (Section 7)

Affected registered retailers shall then be required to list their shares at any stock exchange duly formed and organized under Philippine laws.

Compliance with this requirement shall be supervised and monitored by the SEC.

Sec. 3. – Promotion of Locally Manufactured Products. – For ten (10) years after the effectivity of this Act, at any given time, at least thirty percent (30%) of the aggregate cost of the stock inventory situated in the Philippines of foreign retailers falling under Categories B and C and ten percent (10%) for Category D shall be made in the Philippines.

All registered foreign retailers shall be required to maintain books of accounts showing the inventory situated in the Philippines and its origin at all times and these books may be examined at any time, by the duly authorized representative of the Department of Trade and Industry.

Furthermore, these registered foreign retailers shall be required to submit quarterly statements under oath certifying the ratio of their local and imported inventory.

Sec. 4. Visitorial Powers. – In the public interest and/or for the enforcement of any applicable law, rules and regulations, the DTI/BOI, SEC or any government office having jurisdiction on the matter may, through any of its duly authorized representatives, conduct necessary examination of records, inventory and books of accounts of the registered foreign retail enterprise in the Philippines, make pertinent inquiries from its officials and take such action as may be necessary for the proper exercise of its authority.

Sec. 5. Implementing Agency. – The monitoring and regulation of foreign sole proprietorships, partnerships, associations, or corporations allowed to engage in retail trade shall be the responsibility of the DTI. This shall include resolution of conflicts, through mediation.

Sec. 6. Withdrawal/Closure of Retail Establishments. – Applications for withdrawal or closure of retail establishments shall be filed with the Securities and Exchange Commission for corporations/partnerships/associations or the DTI, through its Regional or Provincial Offices with respect to sole proprietorships.

The DTI shall be notified by the concerned agency of actions taken on requests for withdrawal or closure of foreign retail establishments.

Sec. 7. Penalties. – Any person who shall be found guilty of violation of any provision of this Act, or its implementing rules and regulations, or other terms and conditions of its registration, shall be punished by imprisonment of not less than six (6) years and one (1) day but not more that eight (8) years, and a fine of not less than One million pesos (P1,000,000.00) but not more than Twenty million pesos (P20,000,000.00).

In the case of associations, partnerships or corporations, the penalty shall be imposed upon its partners, president, directors, manager and other officers responsible for the violation. If the offender is not a citizen of the Philippines, he shall be deported immediately after service of sentence. If the Filipino offender is a public officer of employee, he shall, in addition to the penalty prescribed herein, suffer dismissal and permanent disqualification from public office.

RULE X
REPEALING AND EFFECTIVITY CLAUSES

Section 1. All other rules and regulations or parts thereof, inconsistent with the foregoing rules and regulations are repealed, amended or modified accordingly.

Section 2. These Rules shall take effect fifteen (15) days upon publication in two (2) newspapers of general circulation.

Republic Act No. 8762

REPUBLIC ACT NO. 8762 – AN ACT LIBERALIZING THE RETAIL TRADE BUSINESS, REPEALING FOR THE PURPOSE REPUBLIC ACT NO. 1180, AS AMENDED, AND FOR OTHER PURPOSES.

Section 1. Title. – This Act shall be known as the “Retail Trade Liberalization Act of 2000.”

Sec. 2. Declaration of Policy. – It is the policy of the State to promote consumer welfare in attracting, promoting and welcoming productive investments that will bring down prices for the Filipino consumer, create more jobs, promote tourism, assist small manufacturers, stimulate economic growth and enable Philippine goods and services to become globally competitive through the liberalization of the retail trade sector.

Pursuant to this policy, the Philippine retail industry is hereby liberalized to encourage Filipino and foreign investors to forge an efficient and competitive retail trade sector in the interest of empowering the Filipino consumer through lower prices, higher quality if goods, better services and wider choices.

Sec. 3. Definition. – As used in this Act:

(1) “Retail Trade” shall mean any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for consumption, but the restriction of this law shall not apply to the following:

(a) Sales by a manufacturer, processor, laborer, or worker, to the general public the products manufactured, processed or produced by him if his capital does not exceed One Hundred Thousand Pesos (P100,000.00);

(b) Sales by a farmer or agriculturist selling the products of his farm;

(c) Sales in restaurant operations by a hotel owner or inn-keeper irrespective of the amount of capital: Provided, that the restaurant is incidental to the hotel business; and

(d) Sales which are limited only to products manufactured, processed or assembled by a manufacturer through a single outlet, irrespective of capitalization.

(2) “High-end or luxury goods” shall refer to goods which are not necessary for life maintenance and whose demand is generated in large part by the highest income groups. Luxury goods shall include, but are not limited to, products such as: jewelry, branded or designer clothing and footwear, wearing apparel, leisure and sporting goods, electronics and other personal effects.

Sec. 4. Treatment of Natural-Born Citizen Who Has Lost His Philippine Citizenship. – A natural-born citizen of the Philippines who has lost his Philippine citizenship but who resides in the Philippines shall be granted the same rights as Filipino citizens for purposes of this Act.

Sec. 5. Foreign Equity Participation. – Foreign-owned partnerships, associations and corporations formed and organized under the laws of the Philippines may, upon registration with the Securities and Exchange Commission (SEC) and the Department of Trade and Industry (DTI) or in case of foreign-owned single proprietorships, with the DTI, engage or invest in the retail trade business, subject to the following categories:

Category A – Enterprises with paid-up capital of the equivalent in Philippine Pesos of less than Two Million Five Hundred Thousand US Dollars (US$2,500,000.00) shall be reserved exclusively for Filipino citizens and corporations wholly-owned by Filipino citizens.

Category B – Enterprises with a minimum paid-up capital of the equivalent in Philippine Pesos of Two Million Five Hundred Thousand US Dollars (US$2,500,000.00) may be wholly owned by foreigners except for the first two (2) years after the effectivity of this Act wherein foreign participation shall be limited to not more than (60%) of total equity.

Category C – Enterprises with a paid-up capital of the equivalent in Philippine Pesos of Seven Million Five Hundred Thousand US Dollars (US$7,500,000.00) or more maybe wholly owned by foreigners: Provided, however, that in no case shall the investments for establishing a store in Categories B and C be less than the equivalent in Philippine Pesos of Eight Hundred Thirty Thousand US Dollars (US$830,000.00).

Category D – Enterprises specializing in high-end or luxury products with a paid up capital of the equivalent in Philippine Pesos of Two Hundred Fifty Thousand US Dollars (US$250,000.00) per store may be wholly-owned by foreigners.

The foreign investor shall be required to maintain in the Philippines, the full amount of the prescribed minimum capital.  Unless the foreign investor has notified the SEC and the DTI of its intention to repatriate its capital and cease operations in the Philippines. The actual use in Philippine operations of the inwardly remitted minimum capital requirements shall be monitored by the SEC.

Failure retail stores shall secure a certification from the Bangko Sentral ng Pilipinas (BSP) and the DTI, which will verify or confirm inward remittance of the minimum required capital investment.

Sec. 6. Foreign Investors Acquiring Shares of Stock of Local Retailers. – Foreign Investors acquiring shares from existing retail stores whether or not publicly listed whose net worth is in excess of the peso equivalent of Two Million Five Hundred Thousand US Dollars (US$2,500,000.00) may purchase only up to a minimum of sixty percent (60%) of the equity thereof within the first two (2) years from the effectivity of this Act and thereafter, they may acquire the remaining percentage consistent with the allowable foreign participation as herein provided.

Sec. 7. Public Offering of Shares of Stock. – All retail trade enterprises under Categories B and C in which foreign ownership exceeds eighty percent (80%) of equity shall offer a minimum of thirty percent (30%) of their equity to the public through any stock exchange in the Philippines within eight (8) years from their start of operations.

Sec. 8. Qualifications of Foreign Retailers. – No foreign retailer shall be allowed to engage in retail trade in the Philippines unless all the following qualifications are met:

(a)   A minimum of Two Hundred Million US Dollars (US$200,000,000.00) net worth in its parent corporation for Categories B and C, and Fifty Million US Dollars (US$50,000,000.00) net worth in its parent corporation for Category D;

(b)  Five (5) retailing branches or franchises in operation anywhere around the world unless such retailers has at least one (1) store capitalized at a minimum of Twenty-Five Million US Dollars (US$25,000,000.00);

(c)  Five (5)-year track record in retailing; and

(d)  Only nationals from, or judicial entities formed or incorporated in, countries which allow the entry of Filipino retailers, shall be allowed to engage in retail trade in the Philippines.

The DTI is hereby authorized to pre-qualify all foreign retailers, subject to the provisions of this Act, before they are allowed to conduct business in the Philippines.

The DTI shall keep a record of qualified foreign retailers who may, upon compliance with law, establish retail stores in the Philippines.  It shall ensure that the parent retail trading company of the foreign investor complies with the qualifications on capitalization and track record prescribed in this Sec..

The Inter-Agency Committee on Tariff and Related Matters of the National Economic Development Authority (NEDA) Board shall formulate and regularly update a list of foreign retailers of high-end or luxury goods and render an annual report on the same to Congress.

Sec. 9. Promotional of Locally Manufactured Products. – For ten (10) years after the effectivity of this Act, at least thirty percent (30%) of the aggregate cost of the stock inventory of foreign retailers falling under Categories B and C and ten percent (10%) for Category D, shall be made in the Philippines.

Sec. 10. Prohibited Activities of Qualified Foreign Retailers. – Qualified foreign retailers shall not be allowed to engage in certain retailing activities outside their accredited stores through the use of mobile or rolling stores or carts, the use of sales representatives, door-to-door selling, restaurants and sari-sari stores and such other similar retailing activities: Provided, that a detailed list of prohibited activities shall hereafter be formulated by the DTI.

Sec. 11. Implementing Agency; Rules and Regulations. – The monitoring and regulation of foreign sole proprietorships, partnerships, associations or corporations allowed to engage in retail trade shall be the responsibility of the DTI. This shall include resolution of conflicts.

The DTI, in coordination with the SEC, the NEDA and the BSP, shall formulate and issue the implementing rules and regulations necessary to implement this Act within ninety (90) days after its approval.

Sec. 12. Penalty Clause. – Any person who shall be found guilty of violation of any provision of this Act shall be punished by imprisonment of not less than six (6) years and one (1) day but not more than eight (8) years, and a fine of not less than One Million Pesos (P1,000,000.00) but not more than Twenty Million Pesos (P20,000,000.00).

In the case of associations, partnerships or corporations, the penalty shall be imposed upon its partners, president, directors, managers and other officers responsible for the violation.  If the offender is not a citizen of the Philippines, he shall be deported immediately after service of sentence.  If the Filipino offender is a public officer or employee, he shall, in addition to the penalty prescribed herein, suffer dismissal and permanent disqualification from public office.

Sec. 13. Repealing Clause. – Republic Act No. 1180, as amended, is hereby repealed.  Republic Act No. 3018, as amended, and all other laws, executive orders, rules and regulations or parts thereof inconsistent with this Act are repealed or modified accordingly.

Sec. 14. Separability Clause. – If any provision of this Act shall be held unconstitutional, the other provisions not otherwise affected thereby shall remain in force and effect.

Sec. 15. Effectivity. – This Act shall take effect fifteen (15) days after its approval and publication in at least two (2) newspapers of general circulation in the Philippines.

MANUEL B. VILLAR, JR.
Speaker of the House of Representatives

BLAS F. OPLE
President of the Senate

[This Act, which is a consolidation of Senate Bill No. 153 and House Bill No. 7602, was finally passed by the Senate and House of Representatives on February 15, 2000].

ROBERTO P. NAZARENO
Secretary General
House of Representatives

HEZEL P. GACUTAN
Secretary
Senate

Approved:

JOSEPH EJERCITO ESTRADA
President of the Philippines